MR. FLEISCHER: Good afternoon. I'll give you a report on the
President's day, and I'm happy to take your questions. The President
began with an intelligence briefing, followed by an FBI briefing. And
the President departed the White House and went and participated in
both a roundtable discussion and gave remarks on his growth and job
package to employees of the National Capital Flag Company -- talking
about the possibility of additional job creation at this company in
Northern Virginia, as a result of the increased expensing provisions
the President included in his economic plan.

Later today the President will have lunch with the Vice President.
That is actually -- as we speak they are dining. And those are the
reports on the President's schedule today. I'm happy to take your
questions.

MR. FLEISCHER: I'm not sure that's quite the issue. In this
instance, Governor Richardson, who was the former Ambassador to the
United Nations, received communication from the North Koreans in New
York -- the North Korean Ambassador -- saying that he wanted to
visit with Governor Richardson. Governor Richardson called the State
Department. Under all our agreements with North Korea, in order for
the U.N. Ambassador to the United Nations from North Korea to travel
outside of New York, the State Department has to grant permission, per
the agreements. So Governor Richardson, knowing that as a former
Ambassador, contacted Secretary Powell. Secretary Powell said that he
had no objections to North Korea traveling to New Mexico to visit with
Governor Richardson. And we don't know what it is that North Korea
wants to say to Governor Richardson; the only message that we expect is
what America's position is, that we are ready to talk and that we will
not negotiate. That's the United States position, and you should not
see this as anything beyond that.

Q Did you ask him to convey that message?

MR. FLEISCHER: Well, that's our message, and Secretary Powell just
said to him, this is our message. The same thing in public that you've
heard.

Q But sources close to Richardson have said that the
administration initiated some contact with him about a discussion with
North Korea.

MR. FLEISCHER: The conversation as it was related to me was
exactly as I laid out.

MR. FLEISCHER: Well, the problem with guns that are hidden is you
can't see their smoke. And so we will still await to see what the
inspectors find in Iraq and what events in Iraq lead to. The report
that we understand was conveyed in the meeting up in New York this
morning said that the work of the inspectors is still underway, they
continue to gather information. And the report also cited a number of
concerns and a number of problems in what Iraq has been doing.

Q But it wouldn't be disappointing, would it, if there were no
weapons there?

MR. FLEISCHER: We know for a fact that there are weapons there.
And so -- the inspectors also went on --

Q What's the search all about if you know it so factually?

MR. FLEISCHER: Let me cite to you what was -- what the
inspectors have said at the United Nations. And this if from their
reports. "In order to create confidence that it has no more weapons of
mass destruction and proscribed activities related to such weapons,
Iraq must present credible evidence. It cannot just maintain that it
must be deemed to be without proscribed items so long as their is no
evidence to the contrary."

Now, continuing in the words of the inspectors, "A person accused
of illegal possession of weapons may indeed be acquitted for lack of
evidence. But if a state which has used such weapons is to create
confidence it no longer has any prohibited weapons, it will need to
present solid evidence or present remaining items for elimination under
supervision."

And they continue, "If evidence is not presented which gives us a
high degree of assurance, there is no way the inspectors can close a
file by simply invoking a precept that Iraq cannot prove the negative.
In such cases, regrettably, they must conclude, as they have done in
the past, that the absence of a particular item is not assured."

So while they've said that there's no smoking gun, they said the
absence of it is not assured. And that's the heart of the problem.
The heart of the problem is Iraq is very good at hiding things.

Q The heart of the problem is there is a lack of confidence in
anybody speaking the truth there, isn't that --

MR. FLEISCHER: Are you accusing the inspectors of not speaking the
truth when they say that it's not assured?

Q No, I think they're speaking the truth, and the country won't
accept it.

MR. FLEISCHER: So when they say the absence of the particular item
is not assured, you accept that as the truth. You agree with the
President. I'm very proud.

Q I mean, the point is, wouldn't you be happy if there were no
weapons there?

MR. FLEISCHER: There would be nothing that would make the
President happier than there being no weapons in Iraq. And the best
way to make certain that there are no weapons in Iraq is for Saddam
Hussein to disarm himself of the weapons he has.

Q The inspectors have also said that there's no deadline to
their inspections. They need time. Prime Minister Blair has said that
they need time and space, that the January 27th report that they'll
deliver should not be seen as any kind of deadline. And Secretary
Powell said that, as well. Is this an indication that the President is
willing to let the inspectors go at this for a good, long while?

MR. FLEISCHER: Terry, I've never heard the President put a time
line on it. The President wants the inspectors to continue to do
exactly what they are doing, which is to do their level best to carry
out the search, given the fact that Iraq has thrown up hurdles and
isn't complying in all aspects, continuing with what the inspectors
have reported in New York.

They cited a number of issues that are real causes for concern by
the United States government. And among the things that the inspectors
themselves have said are discrepancies and inconsistencies. These deal
with special munitions, illegal imports on a relatively large number of
missile engines, contradictions involving the chemical agent VX,
inadequate response by Iraq to provide the names of all personnel who
have been involved in weapons of mass destruction programs. Indeed,
the inspectors found that the list that Iraq provided of who has been
involved in the weapons of mass destruction programs left out known
names of people who have been involved in the weapons of mass
destruction programs.

The inspectors themselves have concluded that Iraq failed to make a
serious effort to respond to this information that the world has
required. Inspections that the IAEA conducted, which the IAEA, per
their rights under the U.N. resolution, asked to be conducted in
private without any Iraqi minders were rejected. The inspections could
only take place if Iraqi minders were in the room -- hardly a
welcoming environment if anybody has information that they want to
share. And so there were a number of things that were said that still
give cause for concern in this report.

Q But is the President willing to give the inspectors the time
and the space that they say they need, the months that they say they'll
need in order to determine the answer to the question?

MR. FLEISCHER: Again, I have not heard the President put a time
line on it. The President has said that he wants the inspectors --
the President has said that he wants the inspectors to be able to do
their jobs, to continue their efforts, and that's what we support.

Q The head of the IAEA said today that the suspect aluminum
tubes Iraq has obtained were not used for -- or not suitable for
enriching uranium. Do you still maintain that Iraq has an active
nuclear weapons program?

MR. FLEISCHER: Well, let's be clear on what he said. What Mr.
ElBaradei has said is, "While the matter is still under investigation
and further verification is foreseen -- so it's not a closed matter
-- the IAEA's analysis of data indicates that the specifications of
the aluminum tubes sought by Iraq in 2001 and 2002 appear to be
consistent with the reverse engineering of rockets. While it would be
possible to modify such tubes for the manufacture of centrifuges, they
are not directly suitable for it. It should be noted, however, that
the attempted acquisition of such tubes is prohibited under the United
Nations resolutions in any case."

So it remains a cause for concern that they are pursuing
acquisition of elements that are banned to them, that have purposes
that still can be used for military purposes. And we do have concerns
about their potential of developing nuclear programs. As you know, we
have always been explicit on this topic. We have always said that we
know that Iraq has weapons of mass destruction of a biological nature.
We know they have weapons of mass destruction of a chemical nature. We
have not said that conclusively about nuclear. We have concerns that
they are seeking to acquire and develop them, of course.

Q And do the Blix statement, the ElBaradei statement, do they
make it harder for you to persuade world opinion that Iraq is a
threat?

MR. FLEISCHER: I think when you hear the list of concerns that
Hans Blix and Dr. ElBaradei have delineated about the failure of Iraq
to comply fully with all their obligations, it gives ongoing cause for
concern to the world. They have said that they have not gotten
everything they have sought, they have not gotten everything that they
need, that the inspections need to continue. And they also walked the
United Nations through how they are now getting more material and more
resources themselves so they can better do their jobs, which we were
very pleased to hear.

Q Ari, going back to the timetable, you said you've never
heard the President lay out a timetable. But he said and you've said
that January 27th if a very significant day.

MR. FLEISCHER: That's true.

Q Is it a deadline?

MR. FLEISCHER: No, the President has not said it's a deadline.
The President has said it's --

Q What do you plan to determine by January 27th?

MR. FLEISCHER: We will hear from the inspectors. So we want to
hear what the inspectors are able to find about their abilities in Iraq
to find and pursue whether or not Iraq has weapons of mass destruction,
and to ascertain what type of compliance Iraq has been providing to the
inspectors.

Q So your expectation is that they will be able to give you
that information in just the next couple of weeks?

MR. FLEISCHER: It's an important reporting date. And we will see
what the inspectors have to say in this three-week period.

Q And if they say, we need months more to go do our jobs?

MR. FLEISCHER: I can't speculate. Let's see what they say.

Q Well, presumably, we're not sending thousands of troops to
the region, spending millions of dollars deploying them now if the
administration is willing to let them sit there and twiddle their
thumbs for six months while the inspectors do their job.

MR. FLEISCHER: I think the fact is that the presence of the
military has an effective influence on diplomacy and making sure that
Saddam Hussein understands that he needs to comply, because if he
doesn't, the United States has the means and the ability to make him
comply.

Q So that's why the troops are there now, to send that
message?

MR. FLEISCHER: It certainly does send that message. And the
President has said that either Saddam Hussein disarms, or we will
disarm him. It's a serious message.

MR. FLEISCHER: No, no, I wouldn't say that. I think he did it
because Governor Richardson, a former U.N. Ambassador, made the request
and there was no reason to turn it down.

Q On the interviews, one of the problems in the past,
according to Blix, is what the concerns of the scientists themselves
are. And in fact, in the two cases you referenced the scientists
themselves asked for Iraqi government minders, perhaps out of
necessity. How do they get around that fact? And what is the U.S.
doing to help address some of the logistical concerns that Blix
expressed about interviews with scientists, either outside the country
or in private?

MR. FLEISCHER: Well, you've put your finger on one of the ongoing
issues that make matters difficult for the inspectors. In fact, the
IAEA in its report up in New York continued to say that, the IAEA's
efforts to draw such conclusions will be greatly facilitated by the
active cooperation of Iraq -- not only in continuing to secure access
to locations, but importantly, in providing documentation, making
available Iraqi personnel for interview and encouraging them to accept
IAEA modalities for such interviews, and providing IAEA with any
physical evidence which would assist in reaching its conclusions.

So IAEA has said to the United Nations Security Council that they
require more cooperation from Iraq if they are able to make valid
judgments about whether Iraq is pursuing nuclear weapons, and they have
the tools available to them, per the United Nations' resolution, to
interview Iraqi scientists, scientists who aren't on the list that Iraq
provided, and to do so in a place and a time where they think they'd be
most productive, not necessarily limit it to Iraq.

Q Are there things that the U.S. is doing to facilitate these
things? There were logistical problems, as Blix put it, sometime
before and we have been led to believe that the U.S. was offering to
eliminate any obstacles that might present themselves.

MR. FLEISCHER: Specifically, I don't know the answer to that
question. And generally, the answer is, yes, of course, we're working
with the inspectors as part of the international community to help them
to have the tools to do their job. They also, as I indicated, have new
equipment arriving in the country that makes it easier for them to do
their jobs.

MR. FLEISCHER: I suppose you could say that some Democrats have an
interesting way of wishing the President a happy new year. The
President still is going to work with Democrats on the Hill, despite
the fact that there very well may be some Democrats on the Hill who
don't want to work with the President, at least on this issue.

Q If I could ask you one other thing --

MR. FLEISCHER: Jim, we're going to keep moving. We're receiving
complaints from the back of the room that we haven't been getting to
them.

Q That's because you slow down on the first row so much.

MR. FLEISCHER: The second row is slowing me down, too.

Q I'll limit it to two. Is there not a contradiction, on the
one hand, for the President to say publicly he will have zero tolerance
for Iraqi non-compliance, and for the administration to say the burden
is not on the inspectors to find things, the burden is on Iraq to show
what happened to its weapons programs -- and then on the other
hand, say, as you just said, that even the inspectors say Iraq left out
names of scientists known to be working in the weapons program, has not
accounted for mustard gas, other chemical agents known to be there in
the last violation? Why doesn't the President say, zero tolerance,
failed the test?

MR. FLEISCHER: Well, this is why I began this by saying, taking
the broad view about what we learned in New York today. What we
learned in New York today gives further concern for people who want to
keep peace, because Iraq has failed to comply with the United Nations
resolutions. The President has said that he will have zero tolerance
for this. The President has also said that Saddam Hussein will have to
figure out exactly what zero tolerance means and when he means it.

Q The President -- on another issue, the President
resubmitted 30 judges, I think it is, the Democratic Senate either
refused to consider or refused to confirm. And people around he
describe that as a decision by the President that he believes he was
right and he wants his nominees given another chance in the Republican
Senate. Why not do the same thing with Otto Reich? Why instead give
him a presidential job that does not require Senate confirmation? Why
not resubmit his nomination?

MR. FLEISCHER: Well, the President thought that the ideal place
for Otto Reich would be here as part of the National Security Council.
There are many people who work for the National Security Council who
the President has to make a decision about. Does he want to have their
expertise right here within the building, or does the President want to
have their expertise at a different agency that would require Senate
confirmation? So it's a different judgment about different
individuals.

Dr. Rice, for example, of course, she works here for the National
Security Council. There was no question of Senate process or Senate
confirmation. His judgment was, he wants her advice right here close
in the White House. Same thing with Mr. Reich.

Q It's not a calculation to avoid a political appointment?

MR. FLEISCHER: It was principally because of what I just
outlined. Obviously, there would have been some other issues that
would have been raised, had a nomination gone to the Senate. But the
principal reason was because of just what I outlined.

MR. FLEISCHER: That is under review. This is something that the
Department of Justice and the White House are reviewing as we speak and
no decisions have been made.

Q There's only a week left, so presumably they have to be
writing this now. Can you give us a little more on where you are in
the process?

MR. FLEISCHER: Well, the deadline is a week from today. And
that's a lot of time.

Q Why wouldn't you?

MR. FLEISCHER: Well, I'm not indicating whether the administration
will or won't, or if we do, what it might say.

Q But the signal landmark case on affirmative action in 25
years, and the U.S. government isn't going to take a position?

MR. FLEISCHER: I didn't say we would or we wouldn't. I'm just
saying it's a matter that's under review, precisely because it is a
landmark case and a case that's important and a case that the
President, who is very sensitive to issues involving diversity and
opportunity for all, wants to make sure that it's approached in a
thorough and careful, deliberative manner. And so there is one week
remaining on the court given deadline for when an amicus brief would
have to be filed. And so it remains an issue under review.

And by the way, very good. The first row got another question in
that will come out of the second row. Oh, wait, the second row is
done.

MR. FLEISCHER: Well, I'll tell you, it's class warfare to say that
there are wrong people in America and these wrong people are not
deserving of tax relief. The President doesn't look at the American
people and say, I'm from the government, I know who the right people
are -- I'm from the government, I know who the wrong people are. The
President believes that's a divisive approach, and the President seeks
an approach that unifies people. And that's why he wants to work
closely with members of Congress, just as he did in 2001, to try to
arrive at an agreement so taxes can be cut. And he will fight for the
plan that he proposed.

Q Does that mean that anybody who disagrees with him is having
a divisive approach?

MR. FLEISCHER: Well, I think that there's a -- there are ways of
disagreeing. But to say that there are wrong people is certainly a
divisive approach.

Q Senator Chafee said today he's opposed to the President's
stimulus plan. We had John McCain from the Republican side saying he
doesn't think the balance is right. As far as I'm aware, there have
not been any Democrats who have stepped forward and said, we like it
exactly as it stands. Are we seeing warning signs on the Hill?

MR. FLEISCHER: It sounds to me like we're seeing 2001 all over
again. When the President proposed his tax package in early 2001,
there wasn't any Democrats initially who stepped forward and said they
supported it. And as time went along, obviously, 12 Democrats, when
the day came to raise their hand, raised their hand and voted for it.
And so this is how -- exactly how the process works.

I think the big surprise would be when a Republican President
announces a significant package of tax reductions to help get the
economy growing, if a large number of Democrats stood up instantly and
said they were for it. If they stood up instantly to say they were for
it, they would probably be Republicans, not Democrats. So let the
process take place, and I think we'll see ultimately what happens and
who votes for it.

Q Can I just ask you a quick question --

MR. FLEISCHER: And, just a point of fact, there have been -- if
you take a look, there have been favorable statements made by some
Senate Democrats, as well. So allow the process take place.

Q Can I ask about nomenclature? I haven't heard you guys use
the word "stimulus plan." Is that like --

MR. FLEISCHER: Stimulus plan. I've called it both. I've called
it stimulus growth. I saw in the paper today that we're not supposed
to use the word "stimulus" according to somebody. It's stimulus, it's
growth.

Q To follow on Mark's question, at this point in the process
last year -- or in 2001, excuse me -- very early on there had been
positive statements from Democrats. We all remember John Breaux and
the role he played. He was -- and Zell Miller was out early. We
don't have that this time around. I mean, is the President -- does
the President realize or has he acknowledged that he's going to have a
tougher fight this time than he did?

MR. FLEISCHER: I think really you are seeing something very
similar to 2001. And that is, the President makes a proposal, Congress
takes its time to review it, and as time goes along, support grows for
the package. Let's wait and see. They haven't even had any hearings
on it yet. So it's a beginning of the process and events will take
place.

Q A logical follow-up to that, though -- all of this, is
that, does the President think the Republicans who have expressed a lot
of reservations about this package are engaged in class warfare?

MR. FLEISCHER: Well, it depends on their rhetoric. And I haven't
heard Republicans use the same rhetoric that some have used in the
Democratic Party about it.

Q Senator Chafee today --

Q The National Governors Association, an organization of which
the President once was a member, has issued a statement saying that
they regret the plan because it doesn't provide states with the kind of
help they think they need for their budgets. And the Democratic
Governors Association itself is going to come up with its own plan this
afternoon, again pushing for grants to the states to help them with
their budgets. Why didn't the governor -- the President, who was a
governor, not do anything to directly aid the states in this package?

MR. FLEISCHER: For the exact reason I gave yesterday and the day
before on that topic. The President wanted the plan to stimulate the
economy because he viewed that as the best way to help the states. As
a former governor, he's very sympathetic to the needs of the states and
understands the budget issues that they face. But his judgment was the
best use of scarce federal dollars would be to stimulate and grow the
economy and not transfer tax dollars from one taxpayer-funded
government entity to another government entity.

Q But didn't he see -- doesn't he see the governors as
potential allies in this fight? I mean, he's used them in other
legislative issues to help them out. Does he think he'll lose them
here?

MR. FLEISCHER: He's made his judgments on the substance and he's
done it for exactly the reason that I said.

Q I'd like to go back to John's question about Otto Reich. In
the case of the judicial nominees, the opposition is coming exclusively
from Democrats. In the case of Reich, the opposition was coming from a
very senior Republican, Senator Lugar, who is Chairman of the Foreign
Relations Committee. Did that difference influence the President's
thinking?

MR. FLEISCHER: Yes, I indicated the principal reason was because
the President wanted his expertise here. I never ruled out that there
could have been other factors, as well. And it's always important to
gauge the inclinations of the Senate. And those are the reasons.

Q So Senator Lugar's weighing did have an influence, did have
effect?

MR. FLEISCHER: It's always important to be cognizant of the
sentiment of the Senate and to see how widespread it may or may not
be.

Q Ari, as you probably know, the Energy Department put out a
report today saying that fuel prices are going to keep going up for the
next three months. That approaches the summer driving season when they
always go up. What are your concerns about the impact on the overall
economy since energy prices drive the economy, so to speak?

MR. FLEISCHER: The volatility of energy prices remains a very
important issue that the American people and the American government
have got to confront. We, as a country, have gone back and forth,
alternating between periods of spiked up costs in energy to very, very
low prices in energy. And while very high prices of energy hurt
consumers, they spark increased production. Low prices, of course, are
very good for consumers, but they ultimately decrease production. The
best answer is a stable supply of energy that doesn't lead to giant
gyrations of price. And that's why the President thinks is important
for Congress to take up this year energy legislation that will make
America not only more energy independent, but will make supplies more
stable so we don't have to keep going from season to season with
alternating highs and lows of prices.

It's important to note earlier this year Secretary of Health and
Human Service Tommy Thompson announced grants of $545 million to help
low-income seniors with their heating bills. This is going to be a
very important issue. The President wants to make certain that the
money is there for those who need it and the administration is already
moving on that front.

Q In the short-term, is this just a question of supply and
demand, or might the President reconsider the stand that he's taken on
the Strategic Reserve?

MR. FLEISCHER: The administration always monitors the Strategic
Petroleum Reserve, given supply, demand issues and the purpose of the
Reserve, which is to respond to emergencies. You can be assured that
every day it's something that is monitored and is under review. There
are no changes in the decisions that have been made.

MR. FLEISCHER: It's hypothetical. I think it's important to let
the role of the Senate take place. It's unfortunate if people are
already, on the second day of the Congress, talking about
filibustering. The President would hope that wouldn't be the case.
But the process is just beginning. The Judiciary Committee will begin
its work on this nomination as well as all nominations.

MR. FLEISCHER: First of all, it's inaccurate to say that the
benefits will go to the wealthy.

Q Regardless of whether it's accurate or inaccurate, if you
think it is, is it class warfare to point that out?

MR. FLEISCHER: Well, I think it's inaccurate. And because it's
inaccurate, it is used in the political lexicon as a way to divide and
to play class warfare in an effort to portray some Americans as
unworthy of tax relief and other Americans as worthy of tax relief
based on their class. That is class warfare, in the President's
judgment.

Q So someone who legitimately feels that way, they may be
mistaken, but you're saying they're not mistaken, they're using it for
their own political purpose?

MR. FLEISCHER: No, I think it's fair to say that the President
approaches this issue the way he has a governor of a very ethnically
diverse Texas, as somebody who was very sensitive to the importance of
issues involving race and diversity and opportunity for all. I think I
said diversity and opportunity for all. That's how the President
approaches this. He approaches it out of a lifetime of care and
concern on these type of important, sensitive issues involving civil
rights. And that's how he approaches it.

Q Setting aside the affirmative action case for a moment, or
whether he's going to weigh in on it, does the policy of adding 20
points to minority students, does that comport with his policy of
affirmative access, or does it contrast with it?

MR. FLEISCHER: Well, that's what is exactly under review among a
number of other factors in the current case pending before the Supreme
Court. And I think that's the type of thing that the deadline is next
week for weighing in on any type of amicus curai, and we'll wait and
see.

Q It would seem on its face that adding 20 points to the score
of blacks and Hispanics and not giving those 20 points to whites would,
on its face, not be consistent with the President's policy. You're
saying it might be?

MR. FLEISCHER: Bill, it's under review and we'll know when the
review is complete.

Q Does the President embrace the concept of the progressive
taxation? Does he feel that a progressive system is somehow inherently
unfair?

MR. FLEISCHER: No, he does. And, in fact, one of the things that
is notable about the plan the President announced yesterday, or two
days ago, is the President's tax proposal makes the tax code even more
progressive.

Q How does it do that? It flattens the rates.

MR. FLEISCHER: Because the share of taxes paid by people at the
top actually goes up. Because as you remove people from the bottom of
the roles, thanks to the child credit, thanks to the acceleration of
the income tax rate reductions and the expansion of the 10 percent tax
bracket, you have fewer people actually paying any taxes at all at the
bottom. Therefore, the burden that is left is shared increasingly with
those who remain at the top.

So the statistics, the facts of the matter are -- and I don't
think even the Democrats dispute this -- that the burden of those who
pay taxes actually shifts so the upper-income groups pay a higher
percentage of the taxes paid.

Q Isn't it fair to say, though, that when the Democrats
criticize this particular tax plan, they're criticizing on the grounds
that they find it offensive to their notion of progressive taxation?

MR. FLEISCHER: I'm not -- if the Democrats want to make that the
case, they have every right to do so. If they want to say, we oppose
your tax cut on grounds of progressivity, I suppose they can do that.
But as I just indicated, this plan the President announced makes the
tax code even more progressive.

Q So defending progressivity can be interpreted as class
warfare?

MR. FLEISCHER: Well, I think when you say that there are wrong
people in America, and I'm from the government and I know who the right
people are and I know who the wrong people are -- and the division
between America's right people and wrong people is the fact that they
may be successful in life, the President judges that to be class
warfare.

Q Ari, can I change the subject to Mexico? Probably you read
an article in The Washington Post in regards to Mr. Jorge Castaneda,
the Foreign Minister of Mexico. He's resigning to his position in the
Mexican government, apparently because he's frustrated for the lack of
interest of the U.S. government to resolve issues like immigration and
other priorities that seemed to be at the beginning of -- when
President Bush came to the White House.

MR. FLEISCHER: Well, number one, the President has always enjoyed
his relationship with Foreign Minister Castaneda. And he looks forward
to the appointment of a new foreign minister because the relations
between the United States and Mexico remain a top priority for the
President, a very important matter.

There is no question that September 11th had an impact on some of
the progress that was being made between the United States and Mexico
on immigration issues. And like many things that happened with the
attack on our country on September 11th, the President regrets that
that was one of the consequences of it. It clearly has made the
ability to change some of the immigration procedures that the President
had sought to change harder to do, harder to enact into law. For
example, the question of 245I extension -- even something as simple
as that, where there should have been and was widespread bipartisan
support, failed to take place. So the President wishes him well.

Q Ari, has the President personally expressed any frustration
with the way Prime Minister Sharon has prevented the Palestinians from
discussing some of the issues that had been close -- that have been
important for the President, the road map and the reform of the
Palestinian Authority, which was the object of their going to London?

MR. FLEISCHER: Well, the President does believe when he talks to
Prime Minister Sharon about this, that it is very important for reform
of Palestinian institutions to continue. Israel has an important stake
in making certain that these reforms do develop, and that is part of
the overall approach to peace in the Middle East. The President
believes that it's in the interest of all parties in the region.

Interestingly, the Arab neighbors continue to be very helpful in
trying to achieve reform of the Palestinian institutions. That
probably is the single best way, in the President's judgment, to
improve the lives of the Palestinian people.

Q Secondly, Ari, Turkey has indicated that they will not let at
this point U.S. bases be established there. You had the red carpet
treatment from Mr. Ervogan several weeks ago, and he indicated that
Turkey may change its position. Now public opinion is very much
against any military action in Iraq and the government has taken
consideration for that. Isn't this coalition which was envisioned in
the beginning kind of falling apart with the Turkish situation?

MR. FLEISCHER: I would say that the United States and Turkey have
a very common interest in making certain that any security threat from
the Iraqi regime is neutralized. And we have an interest in working
together to foster political and economic stability in the region. The
United States and Turkey have long enjoyed a very healthy and good
strategic relationship, diplomatic relationship, and economic
relationship. We continue to coordinate very closely with Turkey on
the best approach to issues in the region and we will continue to do
so.

MR. FLEISCHER: No, I think the United States and Great Britain
have been working shoulder to shoulder on a common approach to
confronting the threat to peace that Iraq presents. The President
continues to work very closely with Prime Minister Blair. He remains a
very good ally, a very good representative of the people of Britain,
all the people of Britain, and we will continue our relationship. It's
been a very healthy and productive one for both sides.

Q -- that the time that is elapsing is really an ally or a
foe in dealing with Iraq? It seems as we go along further and further
down the road, any --

MR. FLEISCHER: I'm really not sure that, when you talk about the
time elapsing, that the President never said that there was a timetable
here where on January 9th something had to happen or not happen.
That's not how the President has ever approached this. The timetable
is actually unfolding very much as the President sought when the
President went to New York, I think, on September 12th and went to the
United Nations. The inspectors have returned to Iraq; they are in the
middle of conducting their business. And the President is appreciative
to them for their efforts.

MR. FLEISCHER: All details of the opinion are still being
reviewed, but the President is pleased that once again the courts have
recognized that the President has the constitutional authority to
direct the military to detain unlawful combatants, to protect the
American people during this war on terrorism.

MR. FLEISCHER: Correct. Yes, that's an accurate description of
the proposal in its entirety. It won't come as a surprise to anybody
who follows tax policy, frankly. When you remove people who pay taxes
from the bottom, even if you diminish the total amount of taxes that
come in from all, the removal of the people at the bottom means there
are millions now who will no longer be paying income taxes. The burden
of that which remains, even paying a smaller amount of total tax,
falls, therefore, more heavily on the top, because it's the top that
remain. That's the definition of progressivity.

Q I understand that, but that remains the case even when the
estate tax is totally repealed, even if you eliminate taxes on
dividends, that's still the case.

MR. FLEISCHER: That's correct. Let me address one thing about why
this issue about who benefits from tax cuts, I think, is such a
different issue in Washington than it is in the real world. If you
make $30,000 a year, and you pay, for example, $2,000 in taxes, and you
receive a $1,000 tax cut, you just received a 50 percent cut in your
taxes. A thousand dollars to somebody who makes $30,000 a year means
all the world to them. It is a huge difference in their life.

Take somebody toward the top end of the scale, somebody who makes
$200,000, and they pay $50,000 in taxes. To begin with, they pay far
more in income taxes, a point which opponents of the President never
make. They pay far more in income taxes than others who earn less.
They receive a tax cut that in dollar amounts may be larger than
somebody who receives less. To them, that tax cut won't change their
life as much as it does somebody who doesn't earn as much. Their life
will change more so, more beneficially, than somebody toward the top.

These are the real-world differences about what amounts of money
mean to people at different walks of life. The President's point,
though, is it's important to stimulate the economy and to create
opportunities for growth and for jobs. And that's why the President
has approached it the way he has.

Q Yesterday, in the driveway, Nancy Pelosi suggested that one
of the problems with the dividend tax cut is that in some cases, where
companies do not pay taxes themselves in any given year, that instead
of having -- eliminating the tax so that you don't have double
taxation, you would have actually zero taxation. I gather there is
part of the administration's plan that aims to avoid that. Can you
explain that?

MR. FLEISCHER: When you start to look at some of the technical
language behind the way the individual dividend tax cut would work,
corporations in which their income taxes would put them in a position
where they would not be paying taxes, would not have this revision
applied. This gets deep into the technicalities of exactly how tax
transactions work. The Treasury Department has been briefing on it,
and I think they have all the information, they'd be happy to share
it.

Q But doesn't that mean that, in fact, some taxpayers who
receive dividends would find that they are not free of taxes because
they would be taxed if the company was not paying taxes in the first
place?

MR. FLEISCHER: As a general rule, the provision of the tax code
would be eliminated. As always with the tax code, you still have to
see footnotes. It's, unfortunately, the reality of the tax code.

Q Ari, why did the administration decide not to accelerate the
estate tax --

MR. FLEISCHER: Because the purpose of the package that the
President announced was, again, to create opportunities for growth and
to stimulate the economy. When you provide people with these earlier
child tax credits, to modify behavior by getting people to spend more
money earlier, the last thing we want to modify is behavior vis-a-vis
death. It would not exactly be good tax policy to give people an
incentive to die earlier. (Laughter.) So, therefore, estate taxes are
typically not the type of changes you want to make in the tax code
involving their effective date. If you know what I mean. (Laughter.)